Market Entry
Payment Institution vs EMI: UK Route Guide
Comparing UK payment institution and EMI authorisation routes — regulatory scope, capital requirements, safeguarding, and practical considerations.
One of the first regulatory decisions for a UK payments business is whether to apply as a payment institution or an electronic money institution. The choice affects capital requirements, safeguarding obligations, the scope of permitted activities, and the complexity of the application. Getting this wrong creates unnecessary cost and delay.
A payment institution is authorised or registered under the Payment Services Regulations 2017. It can provide payment services such as money remittance, payment initiation, account information services, and payment execution. It cannot issue electronic money. Payment institutions have capital requirements based on the type of payment services provided and must safeguard relevant funds where applicable.
An electronic money institution is authorised or registered under the Electronic Money Regulations 2011. It can issue electronic money — stored value that represents a claim on the issuer — and can also provide payment services. EMIs face additional safeguarding requirements for all outstanding electronic money, including daily reconciliation obligations, segregated account arrangements, and specific wind-down planning for e-money holders.
The practical difference often comes down to whether the business model involves issuing stored value to customers. If the firm holds balances on behalf of users, allows them to store funds in an account, or issues prepaid instruments, the EMI route is likely required. If the firm only transmits payments between parties without holding customer balances as stored value, the PI route may be sufficient.
Capital requirements differ between the two regimes. Payment institutions must hold initial capital ranging from zero for registered small PIs to EUR 125,000 for authorised PIs providing money remittance, and up to EUR 350,000 for those providing payment execution. EMIs must hold a minimum initial capital of EUR 350,000 and maintain ongoing own funds calculated as a percentage of average outstanding electronic money.
Safeguarding is more demanding for EMIs. Both PIs and EMIs must safeguard relevant funds, but EMIs must safeguard all outstanding electronic money from the point of receipt. The FCA expects EMIs to demonstrate robust daily reconciliation processes, segregated safeguarding accounts, due diligence on safeguarding banks, and resolution planning for an orderly return of funds.
Founders should also consider the supervisory burden. EMIs typically face more intensive FCA oversight, more detailed reporting requirements, and higher expectations for governance maturity. This is not a reason to avoid the EMI route if the business model requires it, but it does mean the governance infrastructure needs to be proportionately stronger from the outset.
RegNexus helps founders assess which route fits their business model and then build the governance, evidence, and operational infrastructure required for the chosen path. For a detailed comparison or to discuss your specific situation, see /uk-payment-business-setup or visit /solutions/rav for application preparation support.